Face palm time:
U.S. stock index futures indicated a sharply lower open on Thursday as traders reacted to a sharp fall in European stocks and looked ahead to the second day of Fed Chair Janet Yellen’s testimony in Washington.
Dow futures were indicating a drop of around 250 points in premarket trading, after falling more than 300 points. The pan-European Stoxx 600 index (^STOXX) was down by more than 2.8 percent.
Meanwhile, U.S. Treasurys soared, as the 10-year yield fell to 1.59 percent.
On Wednesday Yellen told the House Financial Services Committee that the Fed was not sure it could legally take rates negative as Europe and Japan have. She also said it was unlikely the Fed would cut rates, having just raised them.
Not sure?!?!?!? Now they tell us? This is almost mindbogglingly incompetent.
OK, I admit it. I was wrong about Yellen. Obama should have nominated Larry Summers. I’m sorry Larry.
PS. Here’s William Dudley back in October:
Federal Reserve officials now seem open to deploying negative interest rates to combat the next serious recession even though they rejected that option during the darkest days of the financial crisis in 2009 and 2010.
“Some of the experiences [in Europe] suggest maybe can we use negative interest rates and the costs aren’t as great as you anticipate,” said William Dudley, the president of the New York Fed, in an interview on CNBC on Friday.
And here’s Janet Yellen in November:
The Federal Reserve would consider pushing interest rates below zero if the U.S. economy took a serious turn for the worse, Fed Chair Janet Yellen said on Wednesday.
“Potentially anything – including negative interest rates – would be on the table. But we would have to study carefully how they would work here in the U.S. context,” Yellen told a House of Representatives committee.
This would happen if the economy were to “deteriorate in a significant way,” she said, adding that she believed negative rates “would have some at least modest favorable effect on banks’ incentives to lend.”